Burden of Proof in Tax Cases

The Matter of Proving in Tax Proceedings

 The matter of proving in tax proceedings is regulated by the Law on Tax Procedure and Tax Administration (“Official Gazette of RS“, No. 80/2002, 84/2002, 23/2003, 70/2003, 55/2004, 61/2005, 85/2005, 62/2006, 63/2006, 61/2007, 20/2009, 72/2009, 53/2010, 101/2011, 2 / 2012, 93/2012, 47/2013, 108/2013, 68/2014, 105/2014, 91/2015, 112/2015, 15/2016, 108/2016, 30/2018, 95 / 2018, 86/2019 and 144/2020). This law provides the following:

The facts in the tax procedure are determined on the basis of evidence. Tax return, tax balance, business books and records, accounting statements, business documentation and other documents and information available to the Tax Administration, collected from the taxpayer or third parties, witness statement, expert report, investigation report and any other means by which facts can be established can be used as evidence in tax proceedings. However, the case law expressed in the verdict of the highest court instance in the Republic of Serbia (Judgment of the Supreme Court of Serbia, U. 2381/07 of 26 November 2009) indicates that tax statements not issued by the competent tax authority to the taxpayer in the legally prescribed procedure could not be deemed as credible evidence in tax proceedings (…“But in the control procedure it was established, based on the official note of the Regional Department of Tax Police, that this taxpayer did not receive tax statements for 2004, and that these are false tax statements that cannot be considered as valid proof in tax proceedings“).

The burden of proof in the tax procedure is borne by the Tax Administration for the facts on which the existence of the tax liability is based, and on the taxpayer for the facts influencing the reduction or abolition of the tax. The suspicion that arises due to the denial of information, i.e. non-submission of evidence by the taxpayer who is obliged to submit it to the Tax Administration, may be to his detriment in the procedure of determining tax notices.

In the event that a person claims that he is holding the rights read in his name or things which are in his possession only as a representative of another person, pledge creditor or fiduciary, he is obliged to prove in tax proceedings who is the owner of those rights or things, or these rights or things shall be deemed to be the property of the person on whom the rights are or in whose possession the things actually are.

However, there is an exception to the rule that the Tax Administration proves the facts on which the existence of a tax liability is based, and the same does not apply to the procedure of assessing the tax base.

The assessment of the tax base can be determined by applying one of the following methods: the method of parification and the method of cross-estimation.

The assessment of the tax base by the method of parification is performed in one of the following ways:

1) assessment on the basis of available proper business documentation with regards to the business operations taken in a certain period shorter than the tax period (daily, weekly or monthly), so that the tax base for the period for which the tax is determined is estimated on the basis of data referring to that part of business activities;

2) assessment on the basis of data and facts on realized turnover (daily, weekly or monthly), determined by the tax inspection or control, so that the tax base for the period for which the tax is determined is estimated on the basis of these data and facts;

3) by comparing with the data of other taxpayers who perform the same or similar activity at the same or similar location, under approximately equal conditions.

The method of cross-estimation of the tax base is used to determine the personal income tax base. The personal income tax base is determined as the difference between the value of property at the end of the calendar year and at the beginning of the calendar year, reduced by the amount of declared income and the value of property acquired by inheritance, gift or other legally and burden-free manner, as well as by the amount of income that is subject to personal income tax and which is not included in the taxation of annual personal income tax, for which the taxpayer or another person points out and provides appropriate material evidence.

The Tax Administration decides which methods and ways it will use to assess the tax base.

In the event that a certain issue in the matter of tax procedure is not regulated by the Law on Tax Procedure and Tax Administration, the Law on General Administrative Procedure (“Official Gazette of RS“, No. 18/2016 and 95/2018) applies to it as a general law. With regard to evidence, this law in principle provides free assessment of evidence by the acting state authority.

Namely, the acting state authority is obliged to correctly, truthfully and completely determine all the facts and circumstances that are important for legal and correct conduct in the administrative matter. The authorized official decides on the basis of his conviction which of the facts are considered proven, based on a conscientious and careful assessment of each piece of evidence separately and all the evidence together, as well as on the basis of the results of the entire procedure.

The state authority determines the facts and circumstances that are important for acting in an administrative matter. The party is obliged to state the factual situation on which it bases its request accurately, completely and specifically. If the facts are not generally known, the party is obliged to propose evidence for its allegations and submit it to the state authority, if possible, provided that the party does not have to obtain the evidence that can be obtained by the state authority, nor certificates and other documents that the authorities are obliged to issue.

The state authority is obliged ex officio to inspect, obtain and process data on the facts about which official records are kept and which are necessary for decision-making process. If the official records are kept by another state authority, the state authority conducting the procedure is obliged to urgently request the data, and the requested state authority to provide the data free of charge within 15 days, unless otherwise prescribed by the law. If the requested information can be obtained electronically, the requested authority shall provide it as soon as possible. In the procedure initiated at the request of a party, the state authority may inspect, obtain and process personal data on facts about which official records are kept when necessary for decision-making, unless the party explicitly states that it will obtain such data itself. If the party does not submit the personal data necessary for the decision of the state authority within the deadline, the request for initiating the procedure will be considered irregular.

Proving procedure begins when the state authority establishes which facts are important for acting in an administrative matter and which of these facts are disputable. The facts that are important for acting in an administrative matter are subject to proving, while the facts that are irrelevant for a specific administrative matter, generally known facts, or facts whose existence is presumed by the law are not proven. However, it is allowed to overturn the legal presumption, and prove that the facts that are presumed do not exist. An administrative matter may be decided even on the basis of facts that have not been fully established or which are only indirectly established by evidence (facts that have only been made probable), if this is determined by the law.

Finally, the acting authority, ex officio or at the request of a party, may decide to present evidence before the requested authority if the presentation of evidence before the prosecuting authority is impracticable or entailed with disproportionate costs or time.